Ministers 'mishandled' BE crisis

The Government is facing criticism from its accounting watchdog over its handling of the crisis at nuclear power generator British Energy.

The National Audit Office is preparing an interim report into the failure of the Department of Trade and Industry to minimise the risk of insolvency to the taxpayer despite warnings in its 1998 report on BE's privatisation.

Last Autumn BE was forced to ask for a Government loan after falling electricity prices left it facing insolvency. Tomorrow bond holders will vote on a Government-backed restructuring which will dilute their investment significantly.

One NAO source said: 'The 1998 report highlighted the risk the taxpayer may have to bear in terms of BE's liabilities. We asked them to put appropriate safeguards in place. It does not look as if they did.'

The official said the risks took two forms: insolvency and credit risk, and of investing funds for nuclear decommissioning in equities.

NAO officials say the Government could have insisted on action over the New Electricity Trading Arrangements (NETA), blamed for BE's troubles. It also influenced senior management, particularly Adrian Montague's appointment as chairman, but this came too late.

Martin O'Neill, chairman of the Trade and Industry Select Committee said: 'It could be said that the consequences of NETA should have been more closely monitored by the DTI.'

Shadow Industry Secretary Tim Yeo said: 'This means the slowness they reacted with last year is all the more culpable.'